The Importance of an Incremental Strategy

Every now and again, someone will come out with a financial study with a shocking click-bait lead: “Millions of Americans have $0 in Retirement Savings!” Even when the research such headlines emerge from is statistically accurate, it can be entirely misleading. For just one example, take a look at this excellent Forbes article from earlier this year.

Still, it’s pretty clear that Americans need to save more for retirement. For one, people are living longer, which means many will live in retirement for as long as four decades. That will require a lot of savings! Second, depending on the number of years you have until you retire, Social Security’s future as a supplement to retirement income is very much in doubt.

One of the key obstacles to many in their savings effort is the instant gratification trap. That is, spending is easy. Saving is harder. Investing may be hardest of all, because it’s not just squirreling money away, it’s actively learning how to make it work for you. That involves some time and effort now that won’t pay off until the distant future.

Investing for retirement is a decidedly long-term goal. Once you’ve established your investing goals, implemented your strategy, and set the money aside, the next steps are to stick to that plan and ...wait. Zzzzzzzzzzz.

Here, then, are a few ways to make the waiting seem a little less mundane.

Set some intermediate goals. Years ago, Fidelity ran an advertising campaign that depicted people walking around, hauling huge numbers like $2,000,000. The idea behind the campaign was to “find your retirement number,” which wasn’t a bad concept. The ads were quickly discontinued, though, due in part to the idea that the people hauling those numbers around looked like they were dealing with an albatross. Thinking about a huge end number of multiple millions can make the day-to-day investment seem pointless and the long-term goal overwhelming. Break it down into smaller increments. Instead of resolving to be a billionaire on your retirement day, resolve to max out your retirement investments this year.

Check your progress. Saving for retirement yields promising evidence as the value of your investments begins to creep up. But many of us receive our retirement statements, glance at them to make sure nothing catastrophic has happened, and move on with our day. Take a closer look, and you may find those incremental rewards that will help you keep on track.

Reevaluate and rededicate. Rebalancing your portfolio is an often forgotten but necessary step for all investors. Investments change all the time with market swings, stock values, bond values, and the like — which can shift the value and allocation of your portfolio. Getting things back in line is important, but it can also give you something active to do while you’re waiting for your savings to add up.

Long-term goals are notoriously difficult to achieve. The key is providing rewards along the way and breaking the goal into shorter, more easily measurable increments.